June 10, 2011

ERP Project - Key Success Factor 5: Business Process Engineering

Business Process Re-engineering (BPR) is definitely a forerunner for any ERP-implementing organization. The role of BPR in implementing Enterprise Resource Planning (ERP) systems is of paramount importance. A variety of approaches are used for such re-engineering, as even the best of breed ERP solutions can give not more than 75-80% fit with the existing organization workflow in which ERP is being implemented. Organizations implementing ERP have chosen their own approach based on organizational constraints & needs. Project team members & managers must identify the core business processes in order to prioritize the BPR approach.

Critical business requirements are to be defined at the start of the ERP Project. The organization should get its key people document the detailed scenarios of their critical business processes that the ERP should be able to manage. The organization should utilize this comprehensive list of business scenarios to keep on track and focused during the ERP evaluation / selection process.

Today, most of the enterprise business applications (ERP / SCM / CRM / BI) are granular enough, that the organization can immediately implement the critical business functionality to meet the most pressing needs, and then address the other less critical needs (wish list) in priority order. This phased project approach would allow more time to master well the ERP operation & can reduce the information overload, which can overwhelm the business users, when forced to learn new processes & screens of an ERP.

Starting the implementation of the core functionality necessary to replace what was provided by existing systems. Once the organization run in this new environ comfortably, there is a solid foundation on which to place additional functionality for process improvements & new business capabilities starting with the most pressing deliverables.

Focus on business processes & requirements is more important than looking at the technical capabilities / platforms that a particular ERP can support. Once these needs are defined, organizations can more effectively choose the software that fits their unique business needs and implement it in a way that require less (if not, no) customization.


BPR Perspectives:
  1. Change Management Perspective - The change management perspectives are BPR, Organizational improvement measures, New reward & recognition system, Customer focus etc.,
  2. Process Perspective - This include Identified processes to change, ERP & process alignment, Top-down approach etc.,
  3. Employee Perspective - Perspectives of employees in an organization consists of Top management commitment, Employee involvement, Assigning right people etc.,
  4. Product Perspective - The product dimensions are Customization level, Required ERP modules etc.,

Main issues of measuring BPR include:
  • Which business processes must change
  • Who collects the BPR metrics
  • Which ERP processes must change
  • Analyse when BPR monitoring must be done
  • Organizational / business implications of BPR
BPR Benefits are:
  • Help as a diagnostic technique to permit the revision of BPR plan to meet the ERP project goals
  • Align Organization business process & ERP
  • Affect decision making particularly as it can help decide between alternative BPR methods
  • Instigate business process & task improvement
  • Decide who should participate in the BPR plan
  • Design of various business processes across organization
BPR limitations are:
  • Delay the project time period
  • Require additional effort from employees
  • Sometimes focus more on the technology view than business

Organizations have the following three BPR options to consider, while implementing the ERP
  1. Re-engineer business processes before implementing ERP and customize ERP completely to conform to the re-engineered business process - Organization needs to analyze the existing business processes, identify non-value add tasks, re-design the business process to create value. Then it should customize the selected ERP completely to conform to the entire re-engineered business process. The downside is that the reengineered business process may not be the best industry practice, if the organization does not have exposure to global best practices. Also, lot of modification of the ERP is not advisable and care should be taken accordingly.
  2. Implement ERP AS-IS without business process reengineering - The ERP system would be implemented AS-IS without considering any business process re-engineering. The organization’s entire business need to conform to the ERP system defined system. The organization need to change all its current business practices and switch over to whatever the ERP system offers. This approach offers adoption of the best practices built in the ERP product and would be installed quickly. This implementation approach can be used for a new business where there are no set practices in place or for an operation, which is very much standardized with industry best practices. However, the organization may not be visualizing all the difficulties likely to be faced during the ERP implementation while selecting the standard process from the ERP system. Issues like organization structure, culture, lack of involvement of people etc. can lead to major implementation difficulties, and full benefits of the ERP implementation may not be achieved. The organization may have to again reengineer its processes, which could be a costly affair.
  3. Re-engineer business processes before implementing ERP & implement ERP with minimal customization to conform to the re-engineered business process but without losing the best practices suggested by the ERP - This option is mid-way between the above two options. Adoption of the best industry practices offered by the ERP product through the implementation would add great business value to the organization. Business process re-engineering would cover the organization specific business requirements. This solution would be in line with the organization's structure, existing resources, business requirements etc., This has a high probability of successful ERP implementation.
ERP Implementation involves re-engineering the existing business processes to the best business process standard. ERP systems are built on best practices that are followed in the industry domain. BPR is aimed at only when the customer’s requirements are not met within the scope of customization allowed by the ERP system. BPR implies changes in the way of doing business as well as on the organization’s structure & culture.

3 comments:

  1. you are right that no ERP can exactly fit the current business process and there may be need in ERP customization or changing business process.But the gap should be minimal.
    Lauren
    sap solution manager

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  2. Great Blog !!!
    It looks like you spend a large amount of time and effort in writing the blog. I am appreciating your effort.
    Importance of erp in business is increase as it allows Purchases and expenditures to registered in a centralized database.
    Thanks for sharing such a nice post...

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  3. Glad I found this post. It’s really awesome.
    Components of BPR like processes, organization & information technologies which automates business processes across the enterprise & provides an organization with a well- designed & well- managed information system.
    Thanks for sharing such a nice post on bpr in erp implementation.

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